02-07-2003 22:31									#1
	What are the pros and cons of state owned businesses? Support Apolyton

I can't decide which economic system is the best. I don't like communism because one should have the freedom to own their own business, I don't think communism and democracy mix, communal ownership sucks, and because many people could just not work and still get paid. I don't like pure capitalism either. I don't like the idea of rich corporate owners running our country and the unemployed need welfare and stuff like that. So I thought socialism is the best. Well, moderate socialism, as in the government owns all banks, service industries, transportation, and companies that deal with resources.

I like the idea of the government owning service industries (such as insurance) because who would you rather get insurance from? A company that just wants your money or a government program with elected leaders that want to actually serve the people. And then there's the transportation business. Airlines pretty much control how people leave and travel around the country. Should something so big and important to our country be controlled by some businessman? I think not, but it's not enough reason for the government to be in control of it. The same goes with resources, such as oil. Resources are very vital to this country (especially oil), I mean one with control over the resources practically runs the country because, so shouldn't the government control companies that deal with the resources? But then if the government owns resource industries because resources are so important, shouldn't it own all production of food, clothing, and shelter?

So I can't decide whether certain industries should be publicly or privately owned. I think the best way to decide is to look at pros and cons. What are the pros and cons of the state owning certain businesses?

	02-07-2003 22:44									#2
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Privately owned but regulated. That's how the American economy works, and it works pretty well.

	02-07-2003 22:53									#3
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The biggest pro and con at the same time is the one that you have identified-- A government-run business will not necessarily be profit driven and may continue money-losing operations for political reaseons. Whther that is good or bad depends on the industry and the political ideology of the person judging it.

Personally, I find many government run businesses to be unnecessarily "fat". The goverrment run liquor stores in Newfoundland, Canada, paid their employees about 60-100% higher wages as compared to other retail stores.

Personally, I am of the view that government should not be involved in business. The role of government should be to provide certain services as efficiently as possible.

	03-07-2003 00:10									#4
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The biggest pros of democracy and capitalism is that they are inherently self-regulating.

	03-07-2003 01:58									#5
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The biggest problem for government-owned businesses is that they are spending someone else's money.

The worst part of this is not outright waste but good intentions gone mad; they must have a policy on everything, and a system to enforce the policy, and someone to check the system is working...

Eventually thy lose track of what the business is REALLY about

This happens in the private sector as well to very big businesses, but if they get it wrong they go bust

	03-07-2003 02:01									#6
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quote: Originally posted by skywalker The biggest pros of democracy and capitalism is that they are inherently self-regulating.

And the winner of this week's most patently absurd statement on Apolyton goes to...

	03-07-2003 02:02									#7
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quote: Originally posted by Flubber Personally, I am of the view that government should not be involved in business. The role of government should be to provide certain services as efficiently as possible.

One man's service is another man's business.

	03-07-2003 02:03									#8
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They are. If something makes money, it survives. Survival is determined by success, because success is defined by survival.

	03-07-2003 02:03									#9
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We could use the British example of how the state-run Royal Mail was, through the 80's and up to the mid 90's, the most profitable mail service in the world.

And then look at how markedly our rail services have improved since they were privatised (Note to non-Brits- Laz is being sarcastic here).

	03-07-2003 02:04									#10
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Um... Agathon.... skywalker is right.

If capitalism gets too far, the democracy will pass a law constraining it. If there is too much regulation, and capitalism is stifled, then democracy will elect people that will remove legislation.

What's wrong with his statement?

	03-07-2003 02:05									#11
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On the rail service it is privatisation, or is it something else that has wrecked the rail industry in the last 5 years (clue: Prescott., Byers, etc)

	03-07-2003 02:05									#12
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Laz: Or you could use the example of British airliners after privatization (ie, a more favorable example to use).

	03-07-2003 02:06									#13
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How is the british mail service run, exactly? Is it state-run in the sense that NASA is state-run? Or is it state run in the sense that the Postal Service is state-run (our postal service is guaranteed a monopoly on 1st-class mail, but is required to charge the same for all locations). The latter example is more reflective of capitalism than communism.

	03-07-2003 02:13									#14
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quote: Originally posted by Agathon One man's service is another man's business.

True-- However, I think the role of government should be to determine those areas that government should involve itself and work to deliver those services. Now if private business can get involved, I see no problem with that.

For instance, I see garbage collection as a valid municipal government function. But if government hires a company in the business of garbage collection, I have no problem with that/

A lot of people differ on what services government should involve itself. For instance, I accept government's involvement in the provision of health care. I don't expect everyone to agee with this.

	03-07-2003 02:33									#15
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quote: Originally posted by Imran Siddiqui Um... Agathon.... skywalker is right. If capitalism gets too far, the democracy will pass a law constraining it. If there is too much regulation, and capitalism is stifled, then democracy will elect people that will remove legislation. What's wrong with his statement?

Because capital can subvert the democratic mechanism by flooding elections with money and making it hard to successfully run for office without the backing of capital. Like in your country.

Any country that wants both capitalism and democracy has to be very careful about separating the former from the latter.

	03-07-2003 02:37									#16
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quote: Because capital can subvert the democratic mechanism by flooding elections with money and making it hard to successfully run for office without the backing of capital. Like in your country.

My country is very healthy, politically and economically, thank you .

Are you telling me that in your country a guy with no money can make a run at office and win? Come on... you either need money or be a party suck-up to win anywhere.

	03-07-2003 02:39									#17
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quote: Originally posted by Flubber True-- However, I think the role of government should be to determine those areas that government should involve itself and work to deliver those services. Now if private business can get involved, I see no problem with that.

It depends. Power generation is one area where privatisation has been disastrous in my country. The public system worked very well and provided cheap power without interruption. People didn't realise how good it was until the privatised services started jacking up the price.

I don't think the government should be opening up corner stores, but health care and large scale infrastructure is certainly worthwhile.

quote: For instance, I see garbage collection as a valid municipal government function. But if government hires a company in the business of garbage collection, I have no problem with that.

I don't disagree, but a well run public utility will always be more efficient than a private one because the private one must make a profit. Often it's cheaper in the long run to contract out garbage collection, but there are plenty of people who want to open everything up to private interests.

quote: A lot of people differ on what services government should involve itself. For instance, I accept government's involvement in the provision of health care. I don't expect everyone to agee with this.

But it doesn't matter as long as everyone is compelled to fund it. Most people are incredibly dumb when it comes to taxation. They all want increased services and a tax cut at the same time (what they really want to do is throw the costs onto others).

No wonder governments have such a hard time - their citizens are venal morons.

	03-07-2003 02:41									#18
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quote: a well run public utility will always be more efficient than a private one because the private one must make a profit.

Aroo? BECAUSE the private company must make a profit, it will always be more efficient than a public utility, even a well run one.

	03-07-2003 02:44									#19
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Agathon - still, the person with the most votes wins! (leaving the electoral college out of this )

Think. What does money allow a politician to do? Advertise. So what if more advertisement results in more people convinced? You still have more people convinced!

The only potential conflict is bribing an elected official to do something not in his/her campaign, and enacting laws against bribery is not inconsistant with democracy or capitalism (and there ARE laws against it).

	03-07-2003 02:44									#20
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The only industries that should be publicaly owned are the ones where monopoly is unavoidable (like electricity infrastructure (but not production), etc.). A state monopoly is infinitely preferable to a private monopoly, but regulated competition is infinitely preferable to a state monopoly.

	03-07-2003 02:46									#21
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quote: Originally posted by Imran Siddiqui quote: a well run public utility will always be more efficient than a private one because the private one must make a profit. Aroo? BECAUSE the private company must make a profit, it will always be more efficient than a public utility, even a well run one.

Well, actually that's not so. There can be exceptions. However, companies that don't have to make a profit tend towards inefficieny, whereas those that do tend towards efficiency.

	03-07-2003 02:47									#22
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St. Leo, .

	03-07-2003 02:47									#23
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quote: Originally posted by Imran Siddiqui quote: a well run public utility will always be more efficient than a private one because the private one must make a profit. Aroo? BECAUSE the private company must make a profit, it will always be more efficient than a public utility, even a well run one.

Why? Presumably efficiency for such a company would be reducing the cost of operations to the lowest possible. There is no reason why a well organised public utility can't do this. Moreover, the private company has to have a profit margin which will mean higher prices.

	03-07-2003 02:50									#24
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Agathon, companies that don't need to make a profit tend towards inefficiency because they survive whether or not they are efficient. Thus, inefficient things are not removed, and the system is not self-regulating.

Plus, you are saying a "well-organised" company. You cannot guarantee that a company will be well-organised. You have to account for situations with poorly-organised companies. Capitalism does so, because there are multiple companies all in competition, and so those that are not well-organised and efficient go bankrupt or change.

	03-07-2003 02:52									#25
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quote: Why? Presumably efficiency for such a company would be reducing the cost of operations to the lowest possible. There is no reason why a well organised public utility can't do this. Moreover, the private company has to have a profit margin which will mean higher prices.

Well organized public utilities do NOT reduce the cost of operations nearly as fast as private companies do. The main reason for it is governmental bureaucracy. Private companies can just initate the change. However, public utilities, after getting convinced to make the change, has to go to the government structure and petition for a change. They have to justify it to the government officers and have to wait a while for anything to be done as it goes down the various channels.

That costs money, and adds to the input side of things. It also prevents public utlities from making minor efficiency changes because the hassle of going through the government.

Secondly, price for profits doesn't mean jack in efficiency concept. Efficiency is merely a product of input and output.

Also usually private companies have lower prices than public utilities (though it may take time to get there). Adam Smith (the poster) has a lot of research on this.

	03-07-2003 02:54									#26
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Imram - well-organised public companies may sometimes reduce the cost faster. However, the tendency is to reduce the cost more slowly, not at all, or increase it.

	03-07-2003 02:55									#27
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quote: Originally posted by skywalker Agathon, companies that don't need to make a profit tend towards inefficiency because they survive whether or not they are efficient. Thus, inefficient things are not removed, and the system is not self-regulating. Plus, you are saying a "well-organised" company. You cannot guarantee that a company will be well-organised. You have to account for situations with poorly-organised companies. Capitalism does so, because there are multiple companies all in competition, and so those that are not well-organised and efficient go bankrupt or change.

That's because public utilities used to do things like keep unnecessary workers on so that unemployment didn't go up.

I favour the State Owned Enterprise model. The company is owned by the government and has a mandate to provide efficient service and it's bosses are rewarded for efficiency gains. It's not much different from a private company except there is no profit.

	03-07-2003 02:56									#28
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quote: Originally posted by Imran Siddiqui Well organized public utilities do NOT reduce the cost of operations nearly as fast as private companies do. The main reason for it is governmental bureaucracy. Private companies can just initate the change. However, public utilities, after getting convinced to make the change, has to go to the government structure and petition for a change.

Not if it is a relatively autonomous SOE. I'm not suggesting a move back to the bad old days of a bloated state sector, but something new.

	03-07-2003 02:58									#29
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quote: I favour the State Owned Enterprise model. The company is owned by the government and has a mandate to provide efficient service and it's bosses are rewarded for efficiency gains. It's not much different from a private company except there is no profit.

And no competition which pushes efficiency much more. What's a bigger push, a bonus or going out of business?

	03-07-2003 02:59									#30
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However, state owned enterprises still don't achieve the self-regulation that capitalism does, because they don't have competition (and "efficiency" can be measured in terms of "things are doing well in my district, so I'll be reelected" ). There are certain state-owned enterprises that are necessary, because without them, essential liberties would be suppressed (postal service for example, which allows people in out-of-the-way places to send mail without paying exorbitant fees). However, anything that is not necessary to preserve essential liberties should be privatized.